How ShareMaestro Works

When you invest in a share (or index), your return will come from two sources:

■ the price at which you sell

■ any dividends which you receive while holding the investment

ShareMaestro uses a 5-year investment period to allow growth companies to grow and bubbles to burst. This period has proved consistently successful for valuing shares.

Stock markets always look forwards rather than backwards. Shares are valued on the basis of future prospects rather than on past performance. "The stock market is a forward-looking discounting mechanism" - Simon Thomson - Trading Secrets, 2009.

ShareMaestro calculates the current value of a share from the fundamental factors which determine their value. ShareMaestro:

■ calculates the future value of the share (in 5 years' time).

■ calculates the accumulated value of dividends and adds this to the future price to determine the future
value of the investment.

■ discounts the future investment value by the Risk Premium to compensate for the greater risk of holding a share rather than a virtually risk-free gilt.

■ discounts the risk-adjusted future investment value back to today's value by using, as a discount rate,
the annual return on 5-year gilts (held to redemption).

■ compares the above current value with the current market price to establish if the price represents
good, bad or fair value. Over 100% indicates that the value is greater than the price and vice-versa.

Through unique algorithms ShareMaestro uses a variety of factors to calculate the share value. Further information is available in the User Manual, which is free to download from the Resource Centre.